9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2010 (2) TMI 1094 - HC - VAT and Sales TaxWhether the lease agreement and purchase order were integrally connected with the movement of goods and ultimate delivery of the goods to the lessee at whose address the goods are consigned by ex State supplier, and was it an integral transfer under section 3(a) of the Central Sales Tax Act, as held in the case of I.T.C. Classic Finance and Services v. Commissioner of Commercial Taxes 1995 (3) TMI 445 - ANDHRA PRADESH HIGH COURT , and accepted by the apex court in 20th Century Finance Corpn. Ltd. v. State of Maharashtra 2000 (5) TMI 980 - SUPREME COURT OF INDIA ? Whether the Commercial Tax Tribunal has erred in law in relying the minority view given in the aforesaid 20th Century Finance Corpn. Ltd. case supra and not following the majority view given by the apex court on the point that the tax was leviable only under Central sales tax treating it as interState transaction? Held that - The transaction under reference being an inter-State sale, there was no question of levy of sales tax thereon by the State Government under the Trade Tax Act, 1948, in view of the express mandate of article 286(1) of the Constitution of India. And also, in view of the legal position declared by the Supreme Court in 20th Century Finance Corpn. Ltd. 2000 119 STC 182; 2000 6 SCC 12, wherein, the vires of section 3F of the Trade Tax Act, 1948 were conditionally upheld by the apex court by expressly recording that the sales tax liability under the aforesaid provision, would not extend to outside sales , and in respect of inter-State sales . The ingredients of section 3 of the Central Sales Tax Act, 1956 must be deemed to have been satisfied by the deemed sales, contemplated through the lease agreements executed between the TCIL and the ONGC/BHEL. This determination has lead to the further conclusion, that the same constitute inter-State sales. The Central Government alone is however competent to levy sales tax on interState sales. That being so, the imposition of sales tax at the hands of the State of Uttar Pradesh on the revision petitioner, would be in clear conflict with the provisions of article 286(1) of the Constitution of India, as also the law declared by the apex court in 20th Century Finance Corpn. Ltd. supra , specially while interpreting section 3F of the Trade Tax Act, 1948, inasmuch as, the vires of the aforesaid provision (under which tax has been levied in this case) has been upheld subject to the condition that the sales tax is not levied on an outside sale or an inter-State sale . The observations recorded by the minority in 20th Century Finance Corporation Ltd. s case supra cannot be taken into consideration for deciding the present case. Since, admittedly, the authorities under the Trade Tax Act, 1948 have based their conclusions on the minority view (recorded in paragraphs 94 to 96 of the judgment) whereas the majority view is to the contrary, we are satisfied that submission advanced by the learned counsel for the revision petitioner also deserves to be accepted.
Issues Involved:
1. Levy of sales tax under Section 3F of the Uttar Pradesh Trade Tax Act, 1948 on rent received by TCIL for the right to use equipment. 2. Determination of whether the lease agreements and purchase orders constitute inter-State sales. 3. Applicability of the majority and minority views in 20th Century Finance Corporation Ltd. v. State of Maharashtra [2000] 119 STC 182 (SC); [2000] 6 SCC 12. 4. Validity of the provisions of the Trade Tax Act, 1948 in light of Article 366(29A) and Article 286 of the Constitution of India. 5. Relevance of situs of sale in determining tax liability. Detailed Analysis: 1. Levy of Sales Tax under Section 3F of the Trade Tax Act, 1948: The assessing authority levied tax under Section 3F of the Trade Tax Act, 1948, on the rent received by TCIL from ONGC and BHEL for the right to use equipment. The appellate authorities confirmed this assessment. The court examined the constitutional provisions and historical judgments, including the Madras High Court's decision in Gannon Dunkerley Co. (Madras) Ltd. v. State of Madras and the Supreme Court's decision in State of Madras v. Gannon Dunkerley & Co. (Madras) Ltd., which clarified that sales tax could not be levied by splitting the total consideration into components of goods and labor. 2. Determination of Inter-State Sales: The court considered whether the lease agreements and purchase orders constituted inter-State sales. It referred to the definition of "inter-State sale" under Section 3 of the Central Sales Tax Act, 1956, which includes sales that occasion the movement of goods from one state to another. The court concluded that the lease agreements and purchase orders were integrally connected, leading to the movement of goods from Mohali/Bangalore to Dehradun/Haridwar, thereby constituting inter-State sales. The court emphasized that the purchase orders were placed to fulfill the lease agreements, and the goods were delivered to the lessees (ONGC/BHEL), who had the authority to inspect and accept the goods. 3. Majority and Minority Views in 20th Century Finance Corporation Ltd. v. State of Maharashtra: The court noted that the majority view in 20th Century Finance Corporation Ltd. v. State of Maharashtra upheld the Andhra Pradesh High Court's decision in I.T.C. Classic Finance and Services v. Commissioner of Commercial Taxes, which treated similar transactions as inter-State sales. The minority view, which supported the Bombay High Court's contrary decision, was not considered binding. The court concluded that the authorities under the Trade Tax Act, 1948, erred in relying on the minority view. 4. Validity of Provisions of the Trade Tax Act, 1948: The court examined the constitutional validity of Sections 2(h) and 3F of the Trade Tax Act, 1948. The majority view in 20th Century Finance Corporation Ltd. upheld these provisions, subject to the condition that they do not apply to inter-State sales or outside sales. The court reiterated that Article 286 of the Constitution prohibits states from levying tax on inter-State sales, and the provisions of the Trade Tax Act, 1948, must be read down accordingly. 5. Relevance of Situs of Sale: The court discussed the relevance of the situs of sale in determining tax liability. It referred to the Supreme Court's decision in 20th Century Finance Corporation Ltd., which clarified that the situs of sale is immaterial in determining inter-State sales. The court emphasized that the movement of goods occasioned by the lease agreements constituted inter-State sales, regardless of where the agreements were executed or where the goods were delivered for use. Conclusion: The court allowed the revision petition, setting aside the impugned orders of the assessing authority, the first appellate authority, and the Tribunal. The court held that the lease agreements constituted inter-State sales, and the imposition of sales tax by the State Government under the Trade Tax Act, 1948, was not permissible. The court's decision was based on the majority view in 20th Century Finance Corporation Ltd., the definition of inter-State sales under the Central Sales Tax Act, 1956, and the constitutional provisions.
|
